Arhaan Ferrous And Non-Ferrous Solutions Pvt Ltd Vs Deputy Assistant Commissioner

FULL TEXT OF THE JUDGMENT/ORDER OF ANDHRA PRADESH HIGH COURT

The 1^st petitioner is the owner of the goods and 2^nd petitioner is the owner of the vehicle in the above writ petitions and they seek writ of mandamus declaring the action of 1^st respondent in detaining their goods and vehicles while in transit with valid invoices as illegal and consequently to set aside the Form GST MOV -01, dated 12.06.2023 and confiscation notices in Form GST MOV -10, dated 14.06.2023 proposing to confiscate the goods and vehicles and pass such other orders deemed fit.

2. Petitioners’ case succinctly is thus:

(a) 1^st petitioner who is common in the above batch of writ petitions is a trader in iron scrap under a valid registered GST No.37AATCA9148B1ZD. He purchased the iron scrap from the 4th respondent under invoice, dated 12.06.2023 and in turn sold the same in favour of M/s Radha Smelters Private Limited, Sankarampet, Medak District, Telangana State under valid invoice number. The 1^st petitioner engaged the vehicles of the 2^nd petitioner for transporting goods from Vijayawada to Sankarampet and consignment was sent along with valid documents such as invoice, way bill, weighment slip etc., While goods were in transit the 1^st respondent detained the vehicles along with the goods on 12.06.2023 on the alleged ground that the vendor of the 1^st petitioner i.e., the 4^th respondent has no place of business at Vijayawada and accordingly issued impugned proceedings in the name of 4^th respondent by deliberately ignoring the documents produced by the drivers at the time of check.

(b) It is further case of the petitioners that the 4^th respondent having sold the scrap has no interest and in case of default on his part, the 1^st respondent may initiate action against the 4^th However, under the guise of initiating proceedings against the 4th respondent, the 1^st respondent cannot put the petitioners in trouble as long as the transaction is covered by all relevant and applicable documents.

(c) It is further case of the petitioners that the 1^st respondent did not follow the procedure contemplated under APGST/ CGST Act, 2017 and in straight away issued proceedings proposing to confiscate the goods under transit without issuing notices in GST MOV -02, 03, 04, 05, 06 07, 08 or GST MOV -09 before issuing notice of confiscation in Form GST MOV -10. It is also contended that the documents served on the 2^nd petitioner do not contain DIN Number. The 1^st respondent has no right or jurisdiction to detain the goods and vehicle of the petitioners.

Hence, the writ petition.

3. The 1^st respondent filed counter mainly contending thus:

(a) On 12.06.2023 the 1^st respondent while conducting check of vehicles at Mahanadu Road, Auto Nagar, Vijayawada found the lorries of the petitioners transporting iron scrap covered by Bill and E-way Bill, which on verification revealed that 4^th respondent was transporting iron scrap from Vijayawada destined to be delivered to M/s Radha Smelters Pvt Ltd., Sankarampet, Medak District, Telangana State. It is noticed that 4^th respondent without having any place of business in Vijayawada dispatched goods therefrom. The consignment was not accompanied by the purchase voucher/invoice and payment of consideration. Hence the proper officer recorded statement of the drivers in Form GST 01. The Joint Commissioner (ST), Kurnool was requested to verify the genesis of the goods and bonafides of the seller dealer. Basing on the report of the Joint Commissioner (ST) Ku;rnool the registering authority suspended the registration of 4^th respondent on 13.06.2023. Since the goods are moved in violation of section 113 of APGST Act, notice of confiscation in Form GST MOV-10 was issued proposing to confiscate the goods and conveyance. Subsequently two reminders were issued to 4th respondent on 23.06.2023 and 03.07.2023. However, the seller remained silent. The transport is covered by bill and way bill issued by the 4^th respondent and verification of the same shows that the 4th respondent sold iron scrap against bill and way bill without any purchase details. In the circumstances the vehicle and goods were detained by following due process of law. Further, the Joint Commissioner (ST), Kurnool informed that the seller is a fake dealer who obtained registration by showing fictitious document and hence the same was suspended. The Assistant Commissioner (ST), Kurnool-I, inspected the business premises of the seller in Kurnool and recorded panchanama through mediators which shows that the seller is a nonexistent entity. In such a scenario, it is questionable as to how the buyer has purchased the goods from a bogus and non-existing seller.

(b) It is contended that the tax invoice and e-Way bill were raised by the 4^th respondent implying that he is the owner of the goods. The 1^st petitioner failed to establish the ownership of goods under dispute but submitted a letter dated 26.06.2023 without signature claiming ownership of the goods. As the letter is without signature, the 1st respondent issued an endorsement dated 30.06.2023 to the address of the registered person which was returned with the endorsement as address is incomplete. This creates a doubt about the existence of the 1st petitioner also. Since the notices in this case were issued through the GST portal by generating reference number and date, DIN need not be generated for them.

(c) It is also contended that since the petitioners failed to establish the ownership of goods and genuineness of the purchases allegedly made from the non-existing dealer, it is not obligatory on the part of proper officer to issue notice to the petitioners. The writ petition is premature as the proceedings are pending and not attained finality. The respondent thus prayed to dismiss the writ petition.

4. The petitioners filed reply affidavit in W.P.No.15481/2023 and opposed the counter averments. It is contended that the suspension of registration of 4^th respondent on 13.06.2023 pending enquiry relating to its genuineness, basing on the report of the Joint Commissioner (ST), Kurnool, is incorrect because the inspection of the premises of the 4th respondent according to Joint Commissioner’s report was held only on 01.07.2023 and that being so, the suspension of registration cannot precede to 13.06.2023. It is further contended that at the time of interception of vehicle for check up, the 1^st petitioner is the owner of the goods-cum-seller and M/s. Radha Smelters Private Limited is the buyer and the transaction is covered by valid invoice and waybill and those documents were accompanying the goods and therefore, if at all the 1^st respondent suspected the genuineness of the documents, he ought to have initiated proceedings against the 1^st petitioner. The 1st respondent deliberately ignored the documents produced at the time of check which shows the source of goods and issued proceedings in the name of 4^th respondent. As per Section 129 of the CGST / APGST Act, 2017, action if any can be initiated against the person who is transporting goods in contravention of the provisions of the Act. In the instant case, the 1^st petitioner is transporting goods with valid documents. Instead of issuing proceedings in the name of petitioner, the 1^st respondent issued notices against 4^th respondent who has no interest in the matter after selling the consignment for valuable consideration to the petitioner. Under law there is no requirement that the petitioner shall verify whether 4^th respondent has any registered place of business at Vijayawada. Having verified the credentials of GST registration number of the 4^th respondent on the Department web portal, the petitioner purchased the goods and paid the consideration through the bank transaction. However, the subsequent suspicion against the genuineness of a registration of 4^th respondent entertained by the Department has no bearing with the transaction entered into by the petitioner with 4^th respondent. It is further contended that in view of deletion of non-obstante clause in Section 130 of the CGST Act, 2017, by virtue of the Finance Act, 2021, Section 129 of the GST Act will have overriding effect on Section 130 of the said Act and thereby, in respect of goods in transit, the procedure prescribed under Section 129 of the CGST Act has to be followed. At any rate, since no notice was issued in the name of the petitioners, the confiscation proposals against 4^th respondent cannot be made applicable against the petitioners.

5. Heard Sri V.Siddharth Reddy, learned counsel for petitioners, and learned Government Pleader for Commercial Taxes-1 representing the respondents. Both the learned counsel reiterated their pleadings in the respective arguments.

Per contra, the contention of 1^st petitioner is that he is the bonafide purchaser from 4^th respondent for valuable consideration on verifying GST registration of the 4^th respondent on the web portal and sold the goods to M/s. Radha Smelters Private Limited, Medak in Telangana and was transporting the goods from Vijayawada to the consignee through the conveyance of 2^nd respondent backed by invoice and e-way bill etc. and in spite of producing the relevant records by the driver, the 1^st respondent did not consider them and issued confiscation proceedings against 4th respondent, the original seller. Their prime contention is that since the interception was made while the goods were in transit, if at all any doubt is entertained against the bonafides of the petitioners, the 1^st respondent shall issue notice u/s 129 of the CGST / APGST Act against the petitioners and proceed accordingly, but the Revenue cannot impose the proceedings initiated against 4^th respondent on the petitioners.

13. In the light of the above respective contentions, the bone of contention in this case is whether the Revenue can confiscate the goods of the petitioners basing on the proceedings initiated against the 4th respondent.

14. In M/s Rajeev Traders’ case (Supra) High Court of Karnataka, (Dharwad Bench) a learned single Judge has drawn the distinction between Section 129 and 130 of CGST Act as follows:

“103. It is to be stated that the power to detain under Section 129 cannot be converted to a proceeding under Section 130 of the Act since both these provisions operate independently of each other and in completely different contexts. The power to detain is only to stop the transit of the goods and thereby prevent its movement till the tax and penalty is paid. However, the power to confiscate is the process of divesting the owner of the goods of all title to the goods for a contravention of the provisions of the Act and Rules. The intent behind conferring power to detain the goods under Section 129 is fundamentally to ensure that the applicable tax and penalty is recovered whereas the intent behind confiscation under Section 130 is to divest the owner of the goods itself and also impose liability of payment of the applicable tax and penalty.”

15. In Synergy Fertichem Pvt Ltd v. State of Gujarat 2020(33) G.S.T.L 513 (Guj.) = MANU/GJ/3200/2019 a division bench of Gujarat High Court also explained the distinction between Section 129 and 130 CGST Act as follows:

“(i) Section 129 of the Act talks about detention, seizure and release of goods and conveyances in transit. On the other hand, Section 130 talks about confiscation of goods or conveyance and levy of tax, penalty and fine thereof. Although, both the sections start with a non-obstante clause, yet, the harmonious reading of the two sections, keeping in mind the object and purpose behind the enactment thereof, would indicate that they are independent of each other. Section 130 of the Act, which provides for confiscation of the goods or conveyance is not, in any manner, dependent or subject to Section 129 of the Act. Both the sections are mutually exclusive.”

16. Thus as can be seen from the two provisions and their narration given in the above two decisions, it is clear that the proceedings for detention of goods can be initiated while the goods are in transit in contravention of provisions of the CGST/APGST Act. In the instant case also the 1^st respondent has detained the goods of the 1^st petitioner while they were in transit from Vijayawada to Sankarampet, Medak, Telangana State. That being the factual scenario, the question is whether 1st respondent can confiscate the goods of the 1^st petitioner without initiating any proceedings against him U/s 129 but initiating proceedings U/s 130 of CGST/APGST Act against the 4^th respondent on the ground of dubious credentials of the 4^th respondent. In our considered view though the 1st respondent may initiate proceedings against the 4^th respondent U/s 130 of the Act in view of his absence in the given address and not holding any business premises at Vijayawada, however, he cannot confiscate the goods of the 1^st petitioner merely on the ground that the 1^st petitioner happen to purchase goods from the 4^th respondent. Even assuming that the petitioners, particularly the 1^st petitioner partakes in the enquiry proceedings against the 4^th respondent, his responsibility will be limited to the extent of establishing that he bonafidely purchased goods from the 4th respondent for valuable consideration by verifying the GST registration of the 4^th respondent available on the official web portal and he was not aware of the credentials of the 4^th respondent. Further, he has to establish the mode of payment of consideration and the mode of receiving of goods from the 4^th respondent through authenticated documents. Except that he cannot be expected to speak about the business activities of the 4^th respondent and also whether he obtained GST registration by producing fake documents. In essence, the petitioners have to establish their own credentials but not the 4th respondent. In that view, the 1^st respondent is not correct in roping the petitioners in the proceedings initiated against the 4^th respondent without initiating independent proceedings U/s 129 of CGST/APGST Act against the petitioners. As the 1^st petitioner claims to have purchased goods from the 4^th respondent whose physical existence in the given address is highly doubtful as per the enquiry conducted by the Joint Commissioner (ST), Kurnool, the 1^st petitioner as observed supra, owes a responsibility to prove the genuineness of the transactions between him and the 4th respondent. Therefore, the 1^st respondent can initiate proceedings U/s 129 of CGST/APGST Act against the petitioners and conduct enquiry by giving opportunity to the petitioners to establish their case.

17. These writ petitions are accordingly disposed of giving liberty to the 1st respondent to initiate proceedings against the petitioners U/s 129 of CGST/APGST Act, 2017 within two weeks from the date of receipt of a copy of this order and conduct enquiry by giving an opportunity of hearing to the petitioners and pass appropriate orders in accordance with governing law and rules. In the meanwhile, the 1^st respondent shall release the detained goods in favour of 1^st petitioner on his deposit of 25% of their value and executing personal bond for the balance and he shall also release the vehicles in favour of the 2^nd petitioner in the respective writ petitions on their executing personal security bonds for the value of the vehicles as determined by concerned Road Transport Authority. No costs.

As a sequel, interlocutory applications pending, if any, shall stand closed.